Correlation Between Silicom and Credo Technology

Can any of the company-specific risk be diversified away by investing in both Silicom and Credo Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Silicom and Credo Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Silicom and Credo Technology Group, you can compare the effects of market volatilities on Silicom and Credo Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Silicom with a short position of Credo Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicom and Credo Technology.

Diversification Opportunities for Silicom and Credo Technology

0.69

Correlation Coefficient

Silicom  Credo Technology

Poor diversification

The 3 months correlation between Silicom and Credo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Silicom and Credo Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Technology and Silicom is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Silicom are associated (or correlated) with Credo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Technology has no effect on the direction of Silicom i.e., Silicom and Credo Technology go up and down completely randomly.

Pair Corralation between Silicom and Credo Technology

Given the investment horizon of 90 days Silicom is expected to generate 0.39 times more return on investment than Credo Technology. However, Silicom is 2.56 times less risky than Credo Technology. It trades about 0.0 of its potential returns per unit of risk. Credo Technology Group is currently generating about -0.08 per unit of risk. If you would invest  1,543  in Silicom on December 28, 2024 and sell it today you would lose (44.00) from holding Silicom or give up 2.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Silicom  vs.  Credo Technology Group

Silicom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Silicom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Silicom is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Credo Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Credo Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Silicom and Credo Technology

The main advantage of trading using opposite Silicom and Credo Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicom position performs unexpectedly, Credo Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Credo Technology will offset losses from the drop in Credo Technology's long position.

The idea behind Silicom and Credo Technology Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.